After the September 18 FOMC meeting, the Fed cut interest rates for the first time in four years. As a result of the 50 basis point rate cut, Bitcoin price hit $62,000 in the late New York session. Let’s understand why this happened.
Here’s Why Bitcoin price Jolts After Fed’s Interest rate cut?
For the past four years the target rate was in the 500 to 525 range, but after Wednesday’s rate cut, it has dropped to 475 to 500 range. Furthermore, there are talks of another 50 bps rate cut by the end of 2024.
A drop in interest rates by 50 bps means it is that much cheaper for investors to borrow. So, a decline in the rates would promote borrowing and spending, which is bullish for risk-on assets like cryptocurrencies or stocks.
But the markets do not always wait for the event, many investors anticipate the outcome and prepare ahead. As a result, BTC price saw a 16% rally since the September 6 bottom. The 50 bps rate cut
Additionally, historical data shows that rate cuts are bullish for BTC.
- The July 2019 rate cuts saw Bitcoin price rise ~30% in the next two months.
- The Fed called for an emergency rate cut in March 2020 due to the COVID-19 pandemic, resulting in a 50% rally in BTC within two months.
Will BTC Continue 2023 Bull Run?
Well, the Fed cut interest rates by 50bps, does that mean Bitcoin price will rally? Will the bull run continue? Not really. There are multiple key factors that affect BTC.
- Global economic conditions
- Inflation expectations
- Central bank policies
- Regulatory environment
- Institutional investment
- Market sentiment
One event that could disrupt the ongoing bullish outlook is Japan’s interest rate decision on Friday. In July, when the Bank of Japan (BOJ) raised interest rates by 25 bps, it caused a panic closing of the YEN-USD carry trades, leading to a financial market meltdown. The central bank’s Kazuo Ueda confirmed that there wouldn’t be any imminent rate hikes, which resulted in recovery of the financial markets. As a result, market participants are closely watching this event to get a read on Bitcoin’s directional bias.
Regardless, investors expect Bitcoin price forecast to send BTC beyond $65,000 and retest the $70,000 psychological level.
Frequently Asked Questions (FAQs)
The 50 basis point rate cut made borrowing cheaper, promoting spending and investment in risk-on assets like cryptocurrencies.
No, multiple factors affect Bitcoin’s price, including global economic conditions, inflation expectations, and regulatory environment.
Japan’s interest rate decision on Friday, as changes in interest rates can impact global financial markets and Bitcoin’s price.
Akash Girimath
Akash Girimath, an engineer by training, has developed a deep fascination with the complexities of cryptocurrency markets. As a senior reporter and analyst, he specializes in crypto analysis and contributes his expertise to notable platforms such as AMBCrypto and FXStreet. In addition to his analytical work, Akash actively trades cryptocurrencies and manages a small crypto fund for friends and family. His role involves providing insightful market analysis and keeping readers informed about the latest trends in the crypto world. Follow Him on Youtube , X and LInkedIn
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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